Nigerian Banks Write Off N1.9trn Bad Loans—Agusto

By Adedapo Adesanya

Nearly N2 trillion bad loans were cancelled by commercial and merchant banks in four years after the 2016 economic recession in Nigeria, a report by Agusto&Co has claimed.

The credit rating agency in the report titled 2020 Banking Industry Report said in the last four years after the economic crisis, the Nigerian banking industry has written off a minimum of N1.9 trillion of impaired loans from its loan portfolio.

The firm noted that the write-offs were driven by the weak macroeconomic climate and the introduction of the international financial reporting standards 9 (IFRS 9) accounting standard in 2019.

The assessment of the industry’s financial condition was based on figures and information published in the approved annual reports of 19 out of the commercial banks and five merchant banks as at December 31, 2019.

In a note, the agency wrote: “These banks collectively accounted for an estimated 98 per cent of the industry’s total assets as at the same date and provide a good representation of the industry.”

“In the last four years, following the 2015/2016 recession, the Nigerian banking industry has written off a minimum of N1.9 trillion of impaired loans from its loan portfolio.

“This volume of write-offs has been driven by the weak macroeconomic climate and the introduction of the international financial reporting standards 9 (IFRS 9) accounting standard in 2019.

“In the wake of the unprecedented COVID-19 pandemic, the industry’s asset quality is further threatened given significant exposures to vulnerable sectors,” it added.

Agusto&Co added that in the wake of the COVID-19 pandemic, the industry’s asset quality is further threatened given significant exposures to vulnerable sectors.

It added that the Central Bank of Nigeria (CBN) granted palliatives to banks in form of permitted loan restructurings to certain sectors that have been severely affected by the pandemic and expect that this will moderate the anticipated level of asset quality deterioration in the short term.